Certification for Major Illicit Drug Producing and Drug Transit Countries

[Federal Register Volume 63, Number 50 (Monday, March 16, 1998)]

[Presidential Documents]

[Pages 12937-12964]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 98-6584]

[[Page 12935]]

_______________________________________________________________________

Part IV

The President

_______________________________________________________________________

Presidential Determination No. 98-15 of February 26, 1998--

Certification for Major Illicit Drug Producing and Drug Transit

Countries

Presidential Documents

Federal Register / Vol. 63, No. 50 / Monday, March 16, 1998 /

Presidential Documents

___________________________________________________________________

Title 3--

The President

[[Page 12937]]

Presidential Determination No. 98-15 of February 26,

1998

Certification for Major Illicit Drug Producing

and Drug Transit Countries

Memorandum for the Secretary of State

By virtue of the authority vested in me by section

490(b)(1)(A) of the Foreign Assistance Act of 1961, as

amended, (``the Act''), I hereby determine and certify

that the following major illicit drug producing and/or

major illicit drug transit countries/dependent

territories have cooperated fully with the United

States, or have taken adequate steps on their own, to

achieve full compliance with the goals and objectives

of the 1988 United Nations Convention Against Illicit

Traffic in Narcotic Drugs and Psychotropic Substances:

LAruba, The Bahamas, Belize, Bolivia, Brazil,

China, Dominican Republic, Ecuador, Guatemala, Haiti,

Hong Kong, India, Jamaica, Laos, Malaysia, Mexico,

Panama, Peru, Taiwan, Thailand, Venezuela, and Vietnam.

By virtue of the authority vested in me by section

490(b)(1)(B) of the Act, I hereby determine that it is

in the vital national interests of the United States to

certify the following major illicit drug producing and/

or major illicit drug transit countries:

Cambodia, Colombia, Pakistan, and Paraguay.

Analysis of the relevant U.S. vital national interests,

as required under section 490(b)(3) of the Act, is

attached.

I have determined that the following major illicit drug

producing and/or major illicit drug transit countries

do not meet the standards set forth in section 490(b)

for certification:

Afghanistan, Burma, Iran, and Nigeria.

In making these determinations, I have considered the

factors set forth in section 490 of the Act, based on

the information contained in the International

Narcotics Control Strategy Report of 1998. Given that

the performance of each of these countries/dependent

territories has differed, I have attached an

explanatory statement for each of the countries/

dependent territories subject to this determination.

You are hereby authorized and directed to report this

determination to the Congress immediately and to

publish it in the Federal Register.

(Presidential Sig.)

THE WHITE HOUSE,

Washington, February 26, 1998.

[[Page 12938]]

STATEMENTS OF EXPLANATION

Aruba

Aruba is a major trafficking and staging point for

international narcotics trafficking organizations which

transship cocaine and heroin from Colombia, Venezuela

and Suriname to the United States and Europe. Its key

position near the Venezuelan coast with air and sea

links to South America, Europe, Puerto Rico and other

Caribbean locations makes it a prime transshipment

point. Drug shipments are made primarily via

containerized cargo, but commercial airlines and cruise

ships are also used.

Money laundering organizations use legitimate

companies as fronts to invest in land development and

other construction projects. The Government of Aruba's

(GOA) Free Trade Zone (FTZ), casinos and resort

complexes are reported to be attractive venues for

money laundering and smuggling. Legislation recommended

by four joint Aruba-Dutch commissions to enhance

monitoring of the FTZ, casinos, import and export of

money, and legal entities is pending.

Although Aruba is a part of the Kingdom of the

Netherlands (GON), it has autonomy over its internal

affairs and has independent decision-making ability in

many drug policy areas. In 1997, the GOA passed and

implemented a new criminal procedural code which allows

for expanded investigative powers for local law

enforcement as well as for extradition of nationals

subject to service of sentences in Aruba. The change in

criminal procedure removed one of the last remaining

barriers to the GOA's full compliance with the 1988 UN

Drug Convention standards. The GOA has yet to ask the

Kingdom of the Netherlands (GON), a party to the 1988

UN Drug Convention, to extend it to Aruba.

The GOA, as part of a joint Netherlands-Netherlands

Antilles-Aruba Coast Guard, received two small fast

patrol boats to patrol the coastal waters and interdict

drug shipments. The GOA established money transaction

monitoring entities to review unusual transactions in

the banking sector. Aruban law enforcement officials

participated in USG-sponsored training courses for drug

enforcement during 1997.

Indications of corruption still hinder the

effectiveness of GOA efforts against international

narcotics traffickers and money launderers. The

withdrawal of the OLA party from the Eman coalition

government and the government's subsequent fall in late

1997 was linked in the press to the efforts of elements

within Aruban society and political circles who are

seeking to halt or reverse recent government actions,

including progress in trans-national crime,

counternarcotics and money laundering issues. Elections

in December returned no one party with a parliamentary

majority and efforts to form a new coalition government

have moved slowly. Progress in implementing anti-drug

measures approved in 1997 may be delayed as a result of

the political impasse.

Despite these problems, Aruba generally cooperated

in 1997 with the USG to meet the goals and objectives

of the 1988 UN Drug Convention.

The Bahamas

The USG and the Government of the Commonwealth of

The Bahamas (GCOB) have enjoyed an excellent,

cooperative working relationship on counternarcotics

over the past decade. The GCOB places a high priority

on combating drug transshipments through its

archipelago, as demonstrated by the extensive resources

it devotes to this initiative. Nevertheless,

significant quantities of illicit drugs continue to

transit The Bahamas en route to the U.S., and The

Bahamas remains a major drug transit country. The GCOB

cooperates very closely with the USG on Operation

Bahamas and Turks and Caicos (OPBAT). U.S. and Bahamian

law enforcement agencies

[[Page 12939]]

worked diligently together throughout the year to

respond to increases in air and maritime transshipment

incidents.

The first country to ratify the 1988 UN Drug

Convention, The Bahamas continues to take steps to

implement it. Following passage of anti-money

laundering legislation (March 1996) and implementing

regulations (December 1996), in November 1997 The

Bahamas submitted its strong anti-money laundering

regime to mutual evaluation by the Caribbean Financial

Action Task Force (CFATF).

During the year, the GCOB continued to strengthen

its judicial system, with assistance from the USG.

However, procedural delays continue to plague the court

system, leading to delays in drug cases. The Bahamas

needs to improve the effectiveness of its court system

in disposing of drug cases more expeditiously.

The GCOB should also put greater emphasis on

forfeiture of the proceeds of crime and trafficker

assets, including early disposal of commodities used in

trafficking before they lose value. The Bahamas has not

yet designated the U.S. under the Bahamian law

concerning execution of foreign forfeiture orders in

The Bahamas, despite repeated U.S. requests since 1993.

In past years, The Bahamas has prosecuted and convicted

some middle- and low-level officials on charges of

narcotics corruption.

Belize

The Government of Belize (GOB) recognizes the

problem of drug transit through its territory and the

effect drug trafficking has on domestic crime. Anti-

narcotics activities are centralized in a committee

consisting of various components of the Belize Police

Force (BPF) and the Belize Defense Force (BDF), with a

dedicated group of investigative police and a rapid

response force called the Dragon Unit. They are active

in the fight against drugs and work closely with the

USG. The GOB is party to the 1988 UN Drug Convention.

With USG help, the GOB continued to work to upgrade

the professionalism and equipment of the BPF to combat

violent crime and narcotics trafficking. A new two-

officer money-laundering unit has recently completed

training with USG support. The GOB has continued its

support of cooperative efforts to reduce drug

trafficking through its borders and to combat the crime

associated with such trafficking. The GOB has also

maintained its support of regional and unilateral

counternarcotics efforts.

1997 was a record year for cocaine interdiction

with more than two metric tons seized. Indications are

that marijuana cultivation remained stable. The efforts

of the Belizean security forces to control narco-

traffic have been hampered by the lack of manpower,

training and equipment, corruption within the ranks,

and the relatively large expanse of uninhabited

territory of the country.

This improved performance, however, was tempered by

the mixed record of convictions and sentencing,

including the dismissal of an important case involving

Colombian, Mexican, and Belizean defendants. The

Belizean judicial system remains weak, understaffed,

and underfunded. Although the GOB and the USG reached

tentative agreement on a new extradition treaty and a

MLAT in late 1996, the GOB subsequently raised new

concerns about certain aspects of these treaties and

negotiations were stalled during 1997. While the new

extradition treaty has not been completed, Belize

continues to extradite alleged criminals to the United

States under the 1972 US-UK extradition treaty.

The GOB needs to continue to fully cooperate with

the USG and take action to meet the goals and

objectives of the 1988 UN Drug Convention and other UN

drug conventions. Of particular importance, the GOB

should improve its prosecution of major drug cases,

provide more support for the judicial branch, and

conclude negotiations on mutual legal assistance and

[[Page 12940]]

extradition treaties with the US. A renewed commitment

to confronting corruption is essential.

Bolivia

Bolivia is the world's second leading producer of

cocaine hydrochloride, and has an illegal coca-cocaine

industry, including sophisticated operations to smuggle

essential chemicals, that is increasingly under the

control of Bolivians. The participation of foreigners

is more and more relegated to the refining of base into

cocaine hydrochloride and to transporting cocaine out

of Bolivia, however, this will diminish as Bolivian

traffickers improve their refining capabilities.

The former GOB never implemented an eradication

program in the Yungas, and quickly discontinued its

policy of arresting and prosecuting persons who plant

new coca. The new Banzer government has promised prompt

action on both issues. Additionally, although

eradication slowed in April and did not effectively

resume until early October, Bolivia exceeded its gross

eradication goal for 1997 of 7,000 hectares and

produced a net reduction in coca cultivation of 2

percent. This is an improvement over the one percent

net reduction in 1996 and was largely conducted after

the inauguration of the new Banzer government.

Bolivia's new government is building a consensus,

via a series of national dialogues, for the country's

first national counternarcotics strategy. Their five-

year plan includes the goal of totally eliminating

illicit coca cultivation by the year 2002.

Total narcotics-related arrests increased

substantially in 1997, as did seizures of cocaine

products and essential chemicals. The Special

Investigative Units--vetted and trained in the U.S.--

have returned to Bolivia and are actively engaged in

their own operations and in supporting the on-going

investigations of other Bolivian counternarcotics

units. The Bolivian Navy's Blue Devil Task Force has

been granted law enforcement authority, a change which

will almost certainly result in greatly improved

interdiction results on the country's waterways.

The legislature is considering critical judicial

reforms, including revisions to Law 1008, Bolivia's

basic counternarcotics law, which will, when enacted,

greatly improve the country's court system and result

in a fairer and more transparent judicial system.

Alternative development initiatives have been

highly successful in providing farmers viable, licit

alternatives and have helped solidify public opinion

against coca cultivation.

In 1998, the Bolivian government must act to

prevent new coca plantings and conduct eradication

efforts in a sustained and intensified manner. A net

reduction of 20 percent (or 7,000 hectares) of coca

plantings must be achieved in 1998 if the Bolivians are

to garner success for their 5-year plan to eliminate

illicit coca. They must eliminate individually

compensated eradication for controlling the cultivation

of new coca fields and prosecute those who plant them.

The Blue Devil Task Force must implement their new law

enforcement authority to effect seizures of narcotics

and chemicals, and arrests of narco-traffickers on

Bolivia's waterways. Enforcement of recently enacted

legislation criminalizing money laundering was delayed,

in 1997, pending clarification of lines of authority

and identification of funding sources. Bolivia must

move forward to vigorously implement these laws.

[[Page 12941]]

Brazil

Brazil is a major transit country for cocaine

shipped by air, river, and maritime routes from

Bolivia, Peru, and Colombia to the U.S. and Europe.

Because of increased interdiction of trafficker

aircraft in Peru (along the Peru/Colombia air

corridor), traffickers have shifted illicit narcotics

flights into Brazilian air space. Brazil's vast and

sparsely populated Amazon region provides ample

opportunity for traffickers to transship drugs and

chemicals by air and riverine routes. A southern ``drug

route'' also exists along Brazil's borders with

Paraguay and Bolivia.

While not a significant cultivation country, Brazil

is a major producer of essential/precursor chemicals

and synthetic drugs. There is also a growing domestic

drug consumption and addiction problem, primarily among

young people. Several key pieces of counter-narcotics

legislation, including an anti-money laundering law,

are under review in the congress. Brazil's bank secrecy

laws and its highly developed financial networks make

it fertile ground for money laundering of drug profits.

Although police drug seizures in 1997 were only

slightly above those in 1996, anti-narcotics law

enforcement units stepped up interdiction activities in

the Amazon region and along the southern ``drug

route.'' The government implemented a new national

defense policy (since 1996) to allow the military to

assist police anti-drug operations in the Amazon.

During two major operations in that region, the police

put a majority of all clandestine airfields out of

operation. In cooperation with neighboring countries,

Brazilian police carried out investigations which

disrupted several major drug smuggling organizations.

Brazil also continues to cooperate in extradition cases

of non-Brazilian citizens.

To signal its continued resolve to deal with

narcotics trafficking problems, Brazil signed a new

Letter of Agreement (LOU) for bilateral cooperation in

narcotics control with the U.S. in 1997. Brazil has

bilateral narcotics control agreements with all its

South American neighbors as well as Germany and Italy.

During a visit by President Clinton in October, Brazil

signed a mutual legal assistance treaty (MLAT) with the

U.S. In another positive step, the government

incorporated anti-money laundering provisions in a

packet of emergency measures sent to Congress in

conjunction with a growing economic/fiscal crisis. This

packet has cleared the lower house of the legislature

and is still being considered by the Brazilian senate

with passage possible in early 1998. Senior government

officials made clear to U.S. interlocutors during 1997

that Brazil was fully committed to working with the

U.S. and other nations in reducing the traffic in

illicit drugs in South America.

China

China both remains a major transit route for

Southeast Asian heroin destined for the U.S. and other

Western markets and has had increasingly to deal with

the phenomenon of itself becoming such a market. China

continues to take a strong stand to battle this trend.

In 1997, it further intensified its nation-wide efforts

to combat drugs by focusing special attention on anti-

drug education. Narcotics seizures also increased, as

did the monitoring of precursor chemicals: there was a

four-fold increase over 1996 in the seizures of such

chemicals. China also moved to strengthen anti-drug

legislation and for the first time identified money

laundering as a crime. In 1997, China signed a Mutual

Legal Assistance Agreement with India which placed

special emphasis on narcotics trafficking. China is

also a party to all of the UN narcotics conventions.

USG-PRC cooperation on counternarcotics issues

improved in 1997. In October, as part of the Joint

Statement issued during the Summit between Presidents

Jiang and Clinton, China agreed to the opening of

reciprocal drug enforcement offices in Beijing and

Washington and to the establishment

[[Page 12942]]

of a Joint Liaison Group on Law Enforcement which

specifically included narcotics trafficking as one of

the issues to be addressed. China hosted two Drug

Enforcement Administration seminars on chemical

control, sent officials to the United States to take

part in airport interdiction training and continued

working-level exchanges of information on international

drug trafficking cases with USG law enforcement

officials. A direct e-mail link with DEA to facilitate

information exchange on drug cases has been

established. In April, China transferred to the U.S.

for prosecution on drug trafficking charges a Burmese

national in its custody.

China continues to struggle with the corruption and

greed which have accompanied economic success and

prosperity. The Government has passed specific laws to

deal with officials guilty of the use, manufacture, or

delivery of narcotics. Penalties for such

transgressions include execution. There is no evidence

of high-level official involvement in the drug trade.

The juxtaposition, however, of low-paid law enforcement

and other officials with the lucrative drug business

creates the potential for corruption.

Chinese officials have noted that 90 percent of the

heroin flowing into China comes from Burma. China's

close trade and political relationship with Burma has

facilitated misuse of their shared 2,000-kilometer

border by drug traffickers. China has pledged

cooperation in helping the Burmese fight narcotics

production and has supported international programs to

wean Burmese farmers away from drug production. China's

success--or its failure--with regard to addressing the

problem of Burmese drug production has serious

implications for China, for the rest of Asia and for

the West.

Dominican Republic

The Dominican Republic is an active transshipment

point for drugs destined for the United States and

Europe. Traffickers smuggle narcotics through Dominican

territory by air, sea, and along the country's porous

border with Haiti. A weak Dominican judicial system

continues to hamper efforts to combat the narcotics

trade, but a promising reform process began in 1997.

The Government of the Dominican Republic (GODR)

continued to cooperate with the United States

Government (USG) on counternarcotics objectives and

goals. The GODR is party to the 1988 United Nations

Drug Convention. It has enacted a money laundering and

asset forfeiture law that complies with the

Organization of American States (OAS)/Inter-American

Drug Abuse Control Commission (CICAD) model. The GODR

and the USG have a bilateral maritime agreement that

allows for consensual boarding of sea vessels by host

country authorities. Dominican authorities cooperate

closely on drug investigation matters with the USG. The

GODR had a mixed record of drug-related seizures and

arrests. There was a decrease in marijuana seizures and

arrests for drug-related offenses (1,481 arrests) in

1997, but an increase in heroin seizures (8.3 kgs).

Cocaine seizures rose slightly from 1996 to 1,354 kgs.

in 1997.

This cooperation has been marred by the

disappointing record of judicial and legislative

reforms. Dominican law prohibits the extradition of

Dominican nationals, creating a refuge in the Dominican

Republic for Dominican nationals who are believed to

have committed serious crimes in the U.S. Pursuant to

an extraordinary and rarely used Executive Order, the

GODR did extradite two Dominican nationals to the

United States in August 1997 to stand trial on charges

of narcotics trafficking and homicide. Dominican

judicial authorities have yet to act on more than two

dozen additional U.S. extradition requests. An absence

of effective government supervision of exchange houses

or remittance operations and the presence of large cash

flows, which could hide money laundering activity,

continue to make the Dominican Republic vulnerable to

further money laundering. Money laundering is not

likely to diminish until the GODR aggressively

implements the money laundering legislation.

[[Page 12943]]

Neither the GODR itself nor senior government

officials encourage, facilitate, or engage in drug

trafficking or money laundering as a matter of

government policy. No evidence exists that senior

government officials are involved in drug distribution

or money laundering. No senior government official has

been indicted for drug-related corruption in 1997.

Ecuador

Ecuador continues to be a major transit country for

the shipment of cocaine from Colombia to the United

States and Europe. Ecuador is also used by traffickers

for money laundering of drug profits and to transit

essential/precursor chemicals destined for Colombian

drug labs. Cocaine is shipped primarily by road from

the Colombian border to major Ecuadorian ports where it

is concealed in bulk cargo transported in large ocean-

going commercial vessels.

In 1997, Ecuador increased the number of

interdiction checkpoints along inland transit routes

leading to ports. With U.S. aid, Ecuador is

establishing a Joint Information Coordination Center

(JICC) in the major port city of Guayaquil. Ecuador

also hosted a U.S. Customs/U.S. Coast Guard team which

assessed port operations for top government officials.

The Ecuadorian Congress passed legislation authorizing

the forfeiture of drug assets and the use of forfeiture

funds in support of prevention, rehabilitation, and

police counter-narcotics activities. Police assigned

personnel for U.S.-sponsored training to form a

``controlled chemical'' investigative unit. The

government submitted new legislation to help police

carry out money laundering investigations.

There is a long tradition of cooperation between

Ecuadorian National Police and U.S. law enforcement in

the area of narcotics control. Still, the police lack

many of the resources needed to deal effectively with a

narcotics trade directed by powerful criminal

organizations in its neighbor to the north, Colombia,

and, to a lesser extent, in Peru to the south.

Cooperation between the Ecuadorian and Peruvian

governments is complicated by an on-going, serious, and

occasionally violent border dispute.

Ecuador cooperated with the U.S. to eradicate most

of its coca crop in the 1980's and thus avoided the

production problems that currently plague its neighbors

Colombia and Peru. In 1997, Ecuador continued to

demonstrate its willingness to work closely with the

U.S. in dealing with other narcotics issues including

major vulnerabilities such as cocaine transshipments,

chemical diversions, money laundering, and judicial

corruption/inefficiency. The police's canine unit, for

instance, was created with U.S. assistance and had a

number of outstanding successes in interdicting cocaine

shipments in 1997. Ecuador has also signalled a

willingness to discuss and work out ways in the near

future to cooperate with the U.S. in maritime

interdiction.

Guatemala

With peace a reality after thirty six-years of

internal conflict, President Arzu has made public

security a top priority and has shown special interest

in ensuring maximum cooperation with the United States

in combatting counternarcotics trafficking through

Guatemala and in the region.

Guatemala is located half way between the U.S. and

Colombia and continues to be a transshipment and

storage point for cocaine destined for the US via

Mexico. There has been a marked increase in the use of

truck and shipping containers. Guatemala has made major

improvements to a self-financed port security program

which expanded operations.

A major initiative resulted in the transition from

the old national and treasury police forces to the new

National Civilian Police (PNC) and the consolidation of

various paramilitary law enforcement agencies. The

Depart

[[Page 12944]]

ment of Anti-Narcotics Operations (DOAN), a specially

equipped civilian police command, was transferred to

the PNC after re-training and a major pay increase.

With USG assistance, the DOAN seized almost 6 metric

tons of cocaine in 1997. There was also steady progress

in the successful prosecution of narcotics-related

crimes with over 90 per cent of those accused being

convicted.

Guatemala works closely with USG organizations to

stem the flow of drugs through Guatemala, but has not

yet enacted necessary legislation to implement all the

provisions of the 1988 UN Convention on narco-

trafficking. The Government of Guatemala (GOG) does not

encourage or facilitate illicit production or

distribution of narcotic or psychotropic drugs or

controlled substances.

Guatemalan studies show that drug use is on the

rise in most age groups with cocaine use increasing

rapidly. However, Guatemala has recently completed a

comprehensive national drug plan which is scheduled to

be implemented starting in January 1998 and which

includes an ambitious demand reduction program.

Haiti

Already confronted by a wide array of issues that

compete for the attention of its limited professional

and managerial talent, the Government of Haiti (GOH)

and its criminal justice institutions are severely

strained by increased international narcotics

trafficking activities. Haiti's fledgling national

police force is hampered by a lack of manpower,

training, equipment, and experience. The poorest nation

in the Western Hemisphere, Haiti is particularly

vulnerable to the corrosive effects of narcotics-

related corruption. Haiti's weak and ineffective

judicial system has a poor track record of narcotics

prosecutions. Haiti is a party to the 1988 UN Drug

Convention.

Because of a significant increase in the detected

activities of Colombian drug trafficking organizations

in Haiti in 1994, Haiti was added to the list of major

drug producing and transit countries in 1995. Due in

measure to effective USG interdiction efforts around

Puerto Rico and the Virgin Islands in 1997, traffickers

have increasingly targeted Haiti's long, undefended

coastline for narcotics deliveries intended for

transshipment (often throughthe Dominican Republic) to

the US. In response to this growing threat, the GOH,

within its existing capacity, cooperated fully with the

United States Government (USG) in counternarcotics

efforts in 1997. The GOH must build upon the positive

steps it has already taken to more aggressively seize

narcotics shipments, pursue and prosecute narcotics

traffickers, and investigate all allegations of

governmental corruption with a view to effective

prosecution.

The GOH is slowly but incrementally putting into

place the legal mechanisms and governmental policies to

counter organized trafficking elements. This effort has

been hampered overall by the ongoing political impasse

over a parliamentary quorum. In 1997, the GOH and the

USG signed a Maritime Counterdrug Agreement. In 1997,

the Haitian Coast Guard (HCG) and the U.S. Coast Guard

(USCG) cooperated in four separate maritime

interdictions that yielded over 2 metric tons of

cocaine and five tons of marijuana. With USG support,

the Counternarcotics Unit of the Haitian National

Police (CNU) was staffed, trained and partially

deployed in 1997. A fully-deployed CNU is scheduled to

move to a permanent headquarters facility at the Port

au Prince airport in 1998.

In response to allegations of drug-related

corruption within the Haitian government, the Haitian

National Police arrested 21 police and judicial

officials for suspected complicity in narcotics

trafficking in 1997. A Ministry of Justice (MOJ)

Special Advisor on Narcotics Matters drafted a national

narcotics strategic plan, completed draft legislation

on money laundering, and updated archaic Haitian

narcotics laws. That said, corruption remains

[[Page 12945]]

an important USG concern, as does the need for

successful prosecutions of narcotics trafficking cases.

In 1997, the GOH continued to give USG officials

high-level assurances of its commitment to drug

control, and those assurances have been supported by

progress in establishing Haitian counter-drug

institutions. However, Haiti still has a number of

major goals to achieve before it will be able to take

significant, independent action in counternarcotics.

Once a new Prime Minister and a new government are

installed, the Maritime Counterdrug Agreement and the

MOJ's legislation can be submitted for Parliamentary

approval and a National Narcotics Plan approved at the

cabinet level. The USG will continue to work with the

GOH to achieve Parliamentary passage of pending and

planned legislation and its vigorous implementation,

continued training the CNU, and the institution of

anti-corruption steps within the ranks in further

compliance with the goals and objectives of the 1988 UN

Drug Convention and the terms of our bilateral

agreements and treaties.

The USG will remain engaged in increasing the

capacity of the HCG and CNU to meet the threat posed by

traffickers. The USG will also help improve the overall

security of the Port-au-Prince Airport to inhibit the

flow of drugs via air links to the U.S. Additional

counternarcotics objectives for Haiti include targeting

at least one major international narcotics organization

for significant interdiction efforts and enacting civil

and administrative asset forfeiture provisions to

facilitate targeting of trafficker assets and companion

legislation requiring use of the forfeited funds solely

for counternarcotics interdiction and enforcement

operations.

Hong Kong Special Administrative Region

The Hong Kong Special Administrative Region remains

a target point for money launderers and drug

traffickers. USG officials believe that Hong Kong

traffickers control large portions of Southeast Asian

narcotics destined for the West, including the United

States. In 1997, however, there were no seizures of

heroin destined for the U.S. which could be tied to

Hong Kong itself. Hong Kong has strengthened money

laundering guidelines applicable to its financial

institutions, securities firms and the insurance

sector. It also enacted the 1997 Drug Trafficking

Order, which allows for the enforcement of confiscation

orders issued by countries that are signatories to the

1988 UN Drug Convention, thus enhancing Hong Kong's

ability to recover the proceeds of drug trafficking.

With Hong Kong's reversion to Chinese sovereignty in

July 1997, the 1988 UN Drug Convention has for the

first time been made applicable to Hong Kong. The U.S.-

Hong Kong Extradition Agreement was ratified by the

U.S. in November 1997 and came into force in January of

this year. The new U.S.-Hong Kong Mutual Legal

Assistance Agreement awaits Senate action.

Close cooperation between Hong Kong law enforcement

agencies and the Public Security Bureau of Guangdong

Province resulted in increased seizures on the mainland

of heroin which would otherwise have entered Hong Kong.

In conformity with the 1988 UN Drug Convention, Hong

Kong amended Schedules 1 and 2 of its Control of

Chemicals Ordinance to place the salts of 17 chemicals

under licensing control. Hong Kong also issues pre-

export notifications to destination countries of

precursor chemical shipments so as to prevent

diversions. As noted by the International Narcotics

Control Board, Hong Kong stopped three suspicious

chemical shipments in 1997. Hong Kong will face the

second review of its system by the Financial Action

Task Force in 1998 and has carefully reviewed its

existing body of narcotics-related legislation and

practices in preparation for that review.

There is no reported narcotics-related corruption

among senior government or law enforcement officials in

Hong Kong. Cooperation between the U.S. and Hong Kong

on counternarcotics matters remains both wide-ranging

and excellent. Hong Kong and USG personnel conducted

several joint narcotics

[[Page 12946]]

investigations in 1997, resulting in a number of

arrests and drug seizures, as well as in financial

seizures. In August, U.S., Hong Kong and Mexican

officials also successfully coordinated a controlled

delivery to Mexico of 150 kilograms of pseudoephedrine

originating in China. Hong Kong Customs and Excise

authorities provided two instructors to assist DEA's

diversion training team in conducting two one-week

seminars in China. Locally posted DEA officers continue

to provide monthly briefings at the Hong Kong Police

Command School.

India

India, an important producer both of licit and

illicit narcotics, is a crossroads for international

narcotics trafficking. It is the world's largest

producer of licit opiates for pharmaceutical use and

the only producer of licit gum opium. Some opium is

diverted from the country's legal production, although

it is difficult to ascertain the exact amount. The

Government of India estimates diversion at about 10

percent, although it may be as high as 30 per cent.

Illicit poppy cultivation declined significantly in the

past year, form 47 metric tons (mts) to 30 mts,

according to USG estimates. India's location between

the two main sources of illicitly grown opium, Burma

and Afghanistan, as well as its well-developed

transportation infrastructure, makes it an ideal

transit point but heroin transshipment is not as

significant as in neighboring Pakistan, Thailand and

China and there is no evidence that opiates

transshipped through India reach the U.S. in

significant amounts.

As a licit producer of opium, India must meet an

additional certification requirement. In accordance

with Section 490(c) of the Foreign Assistance Act, it

must maintain licit production and stockpiles at levels

no higher than those consistent with licit market

demand and take adequate steps to prevent significant

diversion of its licit cultivation and production into

illicit markets and to prevent illicit cultivation and

production.

Indian opium gum, the principal source of thebaine,

and alkaloid essential to certain pharmaceuticals, is

purchased by U.S. pharmaceutical firms. Between 1994

and 1996, India had difficulty meeting its production

goals and satisfying the world demand for this narcotic

raw material. Reduction in acreage, a severe drought

which limited crops and inaccurate physical inventories

over the last 20 years led to a depleted stockpile and

large discrepancies in inventory which were discovered

in 1994.

Starting in 1995, India took a number of steps to

increase licit opium productivity and the licit opium

stockpile. To increase future inventory accuracy, the

traditional method of storing liquid opium in large,

open vats, resulting in undetermined losses due to

evaporation, was changed to a system of sealed cans. To

ensure a more secure stockpile, the GOI increased the

opium crop by increasing each year the minimum

qualifying yield per hectare with which each farmer

must comply. Opium output grew each year, from 833 mts

in 1995 to 849 mts in 1996 to 1,341 mts in 1997. The

GOI also sharply increased its seizures of diverted

licit opium. Greater GOI attention to increasing licit

opium yields both increased the amount of narcotic raw

material available to purchasers and ensured a more

stable stockpile. Following years of an inadequate

supply, this year's increased production finally gives

India a licit stockpile consistent with market demand.

In 1997, India took five important steps to

increase licit opium production to meet market demand

while curtailing the diversion of licit opium. These

steps include: A) raising the minimum qualifying yield

(MQY) for relicensing to cultivate opium poppy from 48

to 52 kilograms per hectare; B) increasing GOI

vigilance of poppy farmers with direct farm visitation

by enforcement personnel to ensure all harvested opium

is turned in to government warehouses; C) seizing 11

mts of raw opium harvested by licit cultivators, but

not declared to the government in 1997 as opposed to

the 2 mts of diverted licit opium seized in 1996; D)

quickly averting the harmful effects of a

[[Page 12947]]

cultivator strike by licensing new farmers to replace

the striking cultivators; and E) making offenses

relating to cultivation and embezzlement of opium by

licensing cultivators on par with other trafficking

offenses, resulting in long prison terms and heavy

fines upon conviction.

While these are adequate steps to curb diversion,

the USG believes even more could be done and will work

with the GOI to increase diversion controls. USG offers

to help the Government of India (GOI) with a survey of

the licit opium fields have not yet been acted upon. A

well-designed crop study would provide accurate data on

crop yields and would be an important step in

establishing practicable levels of minimum qualifying

yield. The data could also be used to extrapolate the

level of diversion. The USG hopes to work with the GOI

on a future joint opium crop yield survey. Scientists

from the U.S. Department of Agriculture and the GOI

have collaborated on the design of a poppy survey.

India also has illicit cultivation, primarily in

Jammu and Kashmir, where GOI control is challenged by

insurgent groups and in the remote hills of Uttar

Pradesh. USG surveys between 1994 and 1997 indicated

illicit cultivation of opium poppy decreased steadily,

with the estimated yield declining from 82 mts of opium

to 30 mts. The GOI locates and destroys illicit

cultivation with vigor, but in some areas, such as

Jammu and Kashmir, GOI control is challenged by

insurgencies. The USG supplies satellite data along

with coordinates of suspected areas of illicit poppy

cultivation and the GOI has carried out extensive field

surveys and some random aerial surveys, some with DEA

assistance.

The GOI has made significant progress in

controlling the production and export of precursor

chemicals. Trafficking in illegally produced

methaqualone (mandrax), a popular drug in Africa, is

still a major problem. The GOI has a cooperative

relationship with the DEA, which is appreciative of

Indian efforts to control trafficking in precursor

chemicals. However, authorities have had limited

success in prosecuting major narcotics offenders

because of the lack of enforcement funding and

weaknesses in the intelligence infrastructure.

India met formally several times in 1997 with

Pakistan to discuss narcotics matters and is committed

to continuing consultations in 1998. Although these

meetings have produced limited results, they are an

important step toward much-needed regional narcotics

cooperation. India has also met with Burmese officials

along the border.

India is party to the 1988 UN Drug Convention, but

has not yet enacted supporting legislation on asset

seizures or money laundering. The substantive steps

India has taken in controlling illicit narcotics growth

and in increasing the harvest of licit opium while at

the same time tightening controls on the licit crop to

prevent diversion qualify India for certification.

Jamaica

Jamaica is a producer of marijuana and an

increasingly significant cocaine transshipment country.

The Government of Jamaica (GOJ) made some progress

during 1997 toward meeting the goals and objectives of

the 1988 UN Drug Convention, to which it became a party

in December 1995, and of our bilateral cooperation

agreements and treaties. Counterdrug cooperation

between DEA and the Jamaica Constabulary Force (JCF)

remained at high levels, and cannabis eradication

increased from 473 hectares in 1996 to 683 hectares in

1997, despite severe resource constraints. In October,

parliament passed a master national drug abuse

prevention and control plan which complies with the

OAS/CICAD model. Many important actions, however, still

remain to be taken by the GOJ to fully meet the

counterdrug goals and objectives.

During 1997, the GOJ extradited to the U.S. three

Jamaican national fugitives from U.S. justice, compared

to 1996, when the GOJ returned one

[[Page 12948]]

Jamaican national under a waiver of extradition, one

U.S.-Jamaican dual national who returned voluntarily

and six U.S. national fugitives who returned

voluntarily or were deported to the U.S. One U.S.

national died in Jamaica in 1996 while extradition

proceedings were pending. The U.S. seeks early

resolution of the 26 active extradition cases currently

pending with Jamaica. Although both countries have

begun to utilize the bilateral Mutual Legal Assistance

Treaty (MLAT), Jamaica needs to speed up its execution

of U.S. mutual legal assistance requests.

By year's end, the GOJ had not yet tabled in

parliament any precursor and essential chemical control

legislation. In September 1997, however, the GOJ signed

with the USG a letter of agreement (LOA) which details

USG counternarcotics assistance to be provided and GOJ

actions to be taken. This agreement includes a GOJ

commitment to introduce into parliament a precursor

chemical control law by April 1998.

In November 1997, the GOJ amended its 1996 anti-

money laundering law to mandate reporting of all cash

transactions of U.S. $10,000 equivalent or more.

Previously, the law incorporated a threshold reporting

requirement for all transaction types. Further

amendments are required to bring Jamaica into full

compliance with the recommendations of the Caribbean

Financial Action Task Force (CFATF). Although there are

four cases pending, to date there has been no

adjudication of money laundering cases. In February

1998, a Jamaican court granted the first forfeiture

order, under the 1994 law, of assets of a convicted

drug dealer; however, Jamaica has not provided for

earmarking of forfeited assets for counterdrug

purposes.

In the area of drug enforcement, GOJ drug arrests

and cocaine and hashish oil seizures increased in 1997

from 1996 levels, but marijuana seizures were down

substantially. A maritime law enforcement cooperation

agreement was signed by the GOJ and USG in May 1997; on

February 24, 1998, the GOJ notified the USG that it had

completed its constitutional requirements for the entry

into force of the agreement. A return notification from

the USG brings the agreement into force. The United

States hopes that, with the agreement in force,

maritime cooperation with Jamaica will improve. The GOJ

needs to reinvigorate the previously successful joint

Jamaica Constabulary Force (JCF)-DEA Operation Prop

Lock, which seized only one trafficker plane during

1997, and that had to be returned to its owner for lack

of probable cause.

Drugs in export shipments continued to threaten

Jamaica's legitimate commerce during 1997. At GOJ

invitation, U.S. agencies conducted an export security

assessment and recommended remedial actions to improve

security at air- and seaports. The GOJ needs to carry

out these recommendations. During 1997, there were

reports in the Jamaican media about drug-related

corruption of police and a resident magistrate, the

latter of whom was arrested on corruption charges. The

GOJ also needs to take strong steps to control drug-

related public corruption. A wide-ranging bill dealing

with corruption of public officials was tabled in

parliament, with passage expected in early 1998.

Parliamentary passage of introduced and planned

legislation and its vigorous implementation will be

necessary for Jamaica to meet fully the goals and

objectives of the 1988 UN Drug Convention and the terms

of our bilateral agreements and treaties.

Laos

Laos remains the world's third largest producer of

illicit opium. Despite concerted efforts by the

government, Laos' estimated potential production as a

result of the 1997 growing season was 210 metric tons,

up 5 percent from 1996. Cultivation increased by 12

percent, with most of the increase in the more isolated

northwest of the country. Opium production remained

low, however, within the USG-funded Houaphanh

alternative development project area. Laos' proximity

to important ports and trade routes also places

[[Page 12949]]

it on the trafficking routes for drugs destined for the

West, including the U.S. Recognizing the phenomenon of

``economic opportunism'' suggested by UNDCP experts as

contributing to increased opium production, Lao

authorities agreed in 1997 to a USG proposal to begin,

for the first time, an eradication program in areas

where alternative development projects are in place.

Lao law enforcement officials made their largest heroin

seizure ever (62.3 kilograms) in Luang Prabhang

Province in May, highlighting the increased

effectiveness of Laos' counternarcotics enforcement

efforts. Laos also ratified the 1971 UN Convention on

Psychotropic Substances and has indicated it may ratify

the 1988 UN Drug Convention in 1998, after passage of

required legislation.

In keeping with its plan to address all aspects of

the drug problem in Laos, the Government of Laos has

emerged as an increasingly active player in regional

and international counternarcotics efforts. In July, it

hosted a trilateral ministerial meeting with Burma and

Thailand to address problems of illicit drug production

and trafficking. Laos also signed bilateral

counternarcotics cooperation agreements with Burma and

the Philippines. It was selected to serve a four-year

term on the UN Commission on Narcotic Drugs, which

began this January.

USG-Lao counternarcotics cooperation remains a

center point of the overall relationship and continues

to be excellent. USG counternarcotics assistance to

Laos has increased as the Lao have moved toward a

counternarcotics policy which seeks to balance

alternative development, law enforcement, eradication

and demand reduction regimes. In order for Laos to

avoid the stigma attached to narco-societies, it must

control opium cultivation, production and trafficking

before modernization exacerbates those problems. It

will also have to deal with the problems posed by

corruption, including possible narcotics-related

corruption, among military and government officials.

The USG's commitment to Laos has been made both in

response to the determination thus far shown by the

Government of Laos and in recognition of Laos' need for

assistance in accomplishing its stated counternarcotics

goals.

Malaysia

For geographic and historical reasons Malaysia

remains, and likely will remain for some time, a

significant transit country for U.S. and European-bound

heroin. Top Malaysian leaders, including the Prime

Minister, are deeply concerned by Malaysia's drug

problem and have made combating illicit drugs one of

Malaysia's top national priorities. Police, armed with

stiff anti-trafficking laws that provide for detention

without trial and, in some cases, mandatory death

sentences, prosecute drug crimes vigorously. The Anti-

Narcotics Division of the police now enjoys department

status. Unlike some of its neighbors, Malaysia is

prepared to move against corruption. Several police

officers were arrested and prosecuted for drugs-related

corruption. Police also arrested several mid-level

police officers and other government officials

including a Malaysian diplomat, who was later acquitted

of drug smuggling charges. A newly amended anti-

corruption act gave the police additional powers to

prosecute corruption in 1997.

The government has also devoted new resources to

drug rehabilitation. In 1997 Malaysian authorities

launched new initiatives aimed at combatting drug use

among the young, improving drug rehabilitation

techniques, and combatting the spread of psychotropic

pills. Cooperation with the USG on combatting drug

trafficking has been excellent. The U.S.-Malaysian

Extradition Treaty came into force in 1997. Positive

discussions on a Mutual Legal Assistance Treaty

continued. Malaysia is working on legislation governing

asset forfeiture and management of seized assets to

complement the MLAT. Malaysia is a party to the 1961 UN

Single Convention and its 1972 Protocol, the 1971 UN

Convention on Psychotropic Substances and the 1988 UN

Drug Convention.

[[Page 12950]]

Mexico

The issue of illicit narcotics trafficking, and

related crimes, remains at the top of the bilateral

agenda between the U.S. and Mexico. These issues

figured prominently in meetings in which Presidents

Clinton and Zedillo approved documents which form the

basis of counternarcotics cooperation between the

United States and Mexico. In May, the two Presidents

issued the ``Declaration of the U.S.-Mexico Alliance

Against Drugs'' and released the Bi-National Drug

Threat Assessment. In November, the two Presidents

approved a summary of a binational drug strategy. Both

leaders have committed to strengthen their governments'

respective anti-drug efforts and to continue to work

toward closer and more effective bilateral anti-drug

cooperation.

The U.S./Mexico High-Level Contact Group on

Narcotics Control (HLCG) and the Senior Law Enforcement

Plenary continued to serve as the principal senior-

level fora for expanding and enhancing bilateral

counter-drug cooperation. The HLCG met three times in

1997, the Plenary twice, and their technical working

groups, which cover issues ranging from chemical

control to demand reduction, met throughout the year.

The HLCG supervised the preparation of the bilateral

threat analysis and the United States/Mexico Binational

Drug Strategy, which was released on February 6, 1998.

During 1997, the Government of Mexico (GOM) took

steps to begin implementing the important legislative

reforms of 1996 to advance its national efforts against

drug trafficking and organized crime. It developed a

number of specialized investigative units, such as the

Organized Crime and Financial Intelligence Units, to

implement those laws. The Bilateral Border Task Forces,

created in 1996, had to be reconstituted in 1997,

however; Mexican personnel are assigned and working in

these units, but are cooperating with U.S. law

enforcement counterparts on a limited basis. Agents

assigned to the new Special Prosecutor's Office and to

the elite investigative units underwent more rigorous

screening and background checks than their predecessors

and the process is being expanded to all parts of the

Office of the Attorney General (PGR). The GOM improved

training for the new agents, and plans to improve

salaries and benefits as well. The U.S. provided

training, technical and material support.

The GOM published regulations needed to implement

anti-money laundering legislation passed in 1996 and

began to work with financial institutions to improve

the effectiveness of its national reporting system for

suspicious and large currency transactions. The Mexican

Congress began its review of new asset forfeiture

legislation. In December, the Mexican Congress passed a

comprehensive chemical control bill enabling the GOM to

regulate all aspects of commerce in precursor and

essential chemicals to prevent their diversion to

illicit drug production. The Chemical Experts Working

Group promotes bilateral cooperation and information

sharing.

The GOM wrestled with very serious corruption

issues in 1997, including an internal investigation

which implicated General Jesus Gutierrez Rebollo, the

head of its federal drug law enforcement agency. He and

a number of co-conspirators are being prosecuted, and

the agency he headed was replaced by a new institution.

Mexico is seeking both to uncover ongoing cases of

corruption as well as to strengthen justice sector

institutions to withstand corrupting influences and

pressures. President Zedillo has made this a national

priority, but acknowledged that lasting reform will

take time.

Drug seizures in 1997 generally increased over 1996

levels. Mexican authorities seized 34.9 MT of cocaine,

115 kgs of heroin, 343 kgs of opium gum, 1,038 MT of

marijuana, 39 kgs of methamphetamine, and destroyed 8

clandestine laboratories. The GOM's massive drug crop

eradication effort reduced net production of opium gum

from an estimated 54 MT in 1996 to 46 MT in 1997, and

of marijuana from 3,400 MT in 1996 to 2,500 MT in 1997.

Authorities arrested 10,742 suspects on drug-related

charges. At least eight individuals considered by U.S.

law enforcement authorities

[[Page 12951]]

to be major traffickers were tried and sentenced to

prison terms of 9 to 40 years, including Joaquin Guzman

Loera (21 years), Hector Luis Palma Salazar (22 years),

Miguel Angel Felix Gallardo (12 years), Raul Valladares

del Angel (29 years). Unfortunately, Humberto Garcia

Abrego was released and Rafael Caro Quintero succeeded

in obtaining a reduction in his sentence.

In 1997, the U.S. and Mexico made further progress

in the return of fugitives. A new Protocol to the

Extradition Treaty, signed at the time of President

Zedillo's visit to Washington in November, will aid the

two governments in their efforts to combat

transnational crime by permitting ``temporary''

extradition of fugitives sentenced in one country to

face criminal charges in the other. The GOM approved

the extradition of 27 fugitives from U.S. justice (12

for drug charges) although nine (all Mexican nationals,

five facing drug charges) are appealing the GOM's

extradition order, or face charges in Mexico. Thirteen

fugitives (seven on drug charges) were formally

extradited; ten other fugitives (eight U.S. citizens

and two third-country nationals) were expelled by the

GOM to the U.S. in lieu of extradition.

Mexico made progress in its anti-drug effort in

1997 and cooperated well with the United States.

Nevertheless, the problems that Mexico faces in

countering powerful criminal organizations, and the

persistent corrupting influence that they exert within

the justice sector, cannot be minimized. There are also

areas of bilateral cooperation which must be improved

for the two governments to achieve greater success in

attacking and dismantling the trans-border drug

trafficking organizations. The U.S. is convinced,

however, of the Zedillo Administration's firm intention

to persist in its campaign against the drug cartels and

its broad-sweeping reform effort. Through daily

interaction between agencies of the two governments,

formal discussions in the HLCG and other bilateral

groups, as well as collaboration in multilateral fora,

the two governments are finding increasingly productive

ways to work together against the common threats our

nations face.

Panama

Panama is major transit point for Colombian cocaine

and heroin on its way to the United States. Cocaine

passes through Panamanian territorial waters concealed

in fishing boats or ``go-fast'' boats. Some of it is

off-loaded on the Panamanian coast and then transported

by truck up the Pan-American Highway into Costa Rica

where it is then bound for the US. It is also carried

by ``mules'' traveling by air to the US and Europe.

There is no evidence that any senior official of the

Government of Panama is involved in any drug scenarios

nor does government policy encourage or facilitate

drug-related criminal activity. However, the amount of

drugs seized by Costa Rican border officials from

tractor trailers entering from Panama is suggestive of

either inadequate inspections or corruption on the part

of Panamanian border officials. Corruption in the

Judiciary remains a concern, particularly because

judges are vulnerable to political influence and are

susceptible to threats.

Panama continued to cooperate with U.S. in

counternarcotics efforts in 1997. In 1997, they took

steps to implement its counternarcotics masterplan,

which was developed by the National Commission for the

Study and Prevention of Drug Related Crimes, a part of

their public ministry. The plan deals with prevention,

treatment, rehabilitation, and re-entry into the

workforce; control of supply; and illicit trafficking.

It encompasses state and non-governmental

organizations. Panama also hosted the ``First

Hemispheric Congress on the Prevention of Money

Laundering'' and became the first Latin American

country to be admitted to the Egmont Group, an alliance

of 30 nations with centralized financial analysis units

to combat money laundering. Panama is also an active

participant in the Commission Against Addiction and

Illicit Trafficking of Drugs (CICAD), the Caribbean

Financial Action Task Force (CFATF) and the Basel

Committee's Offshore Group of Bank Supervisors.

[[Page 12952]]

In 1997, Panamanian officials seized 21.62 metric

tons (MT) of illegal drugs, including 7 MT of cocaine.

Although Panama gives law enforcement a high priority,

this is not reflected by the scant resources and low

wages it provides some of its law enforcement agencies

which lack equipment, training and base facilities.

Panama needs to sign the maritime interdiction

treaty with the U.S. that was negotiated and approved

by the General Directorate of Consular and Maritime

Affairs earlier this year. They need to undertake a

fundamental and wide-ranging reform of the judicial

system to ensure it is protected from political

influence and corruption. Panama needs to sign the

agreement with the U.S. to establish a Multinational

Counternarcotics Center (MCC) at Howard Air Force Base.

Negotiations were essentially completed on this

agreement in late 1997, when the GOP raised new

concerns. The GOP also needs to enact bank reforms it

announced in 1997 and enact legislation to extend the

existing law against drug money laundering to include

the proceeds from all serious crimes.

Peru

Following the 1996 reduction in coca cultivation,

Peruvian coca cultivation declined dramatically in

1997, from 115,300 hectares (with the potential to

produce 460 metric tons of cocaine) in 1995 to less

than 69,000 hectares (with the potential to produce 325

metric tons of cocaine) in 1997. The 1997 percentage

decrease in the total area under coca cultivation was

27 percent, following the 18 percent decline in 1996. A

strong commitment by the Government of Peru (GOP) to

forcibly eradicate illicit mature coca in national

parks and other areas by manual labor means resulted in

over 3,462 hectares destroyed in 1997, a 175 percent

increase over 1996.

This success was the offspring of a combined

Peruvian Air Force (FAP) and Peruvian National Police

Drug Directorate (DINANDRO) ``airbridge denial''

interdiction program and increasingly effective

narcotics law enforcement. These two USG-supported

programs continued to deter traffickers from using

their preferred method of exporting large quantities of

cocaine base by air for further refining into cocaine

hydrochloride (HCl) in Colombia and elsewhere.

``Airbridge denial'' success maintained a cocaine base

glut in the coca cultivation zones and below-

production-cost farmgate coca prices. The collapse of

coca leaf prices spurred greater numbers of farmers to

accept the economic alternatives to coca offered by the

USG-Peru alternative development project, which

expanded in 1997.

The joint U.S.-GOP alternative development program

was successful in strengthening local governments,

providing access to basic health services and promoting

licit economic activities, thereby establishing the

social and economic basis for the permanent elimination

of coca. A total of 239 communities have signed coca

reduction agreements to reduce coca by approximately

16,300 hectares over the next five years.

Responding to traffickers developing new smuggling

methods on Peru's rivers, across land borders and via

maritime routes, Peruvian counternarcotics agencies, in

particular DINANDRO and the Peruvian Coast Guard,

established several riverine counternarcotics bases and

increased resources for riverine anti-drug operations.

Cooperating with USG law enforcement partners and

advisors, DINANDRO worked extensively with drug police

from Colombia and Brazil to share counternarcotics

intelligence and to participate in joint law

enforcement operations in the Amazonian tri-border

area.

In 1997, the Government of Peru (GOP) cooperated

fully with the USG in fulfilling the objectives of the

USG-Peruvian counternarcotics framework agreement and

of the 1988 UN Drug Convention, to which Peru is a

party. Counternarcotics activities remained a GOP

national priority, and Peru's 1997 ``National Plan for

Alternative Development, Drug Prevention and

Rehabilitation'' set goals of reducing illicit coca

production by approximately 50 percent within five

years.

[[Page 12953]]

Taiwan

Given trafficking patterns in the region and

Taiwan's role as a shipping center, the U.S. believes

Taiwan remains a transit point for drugs significantly

affecting the U.S. While Taiwan authorities dispute

this assessment, there is no disagreement with regard

to the fact that individuals from Taiwan continue to be

involved in international narcotics trafficking. Some

67 percent of all drugs smuggled into Taiwan are

believed to come from China. Whatever their belief

about Taiwan's transit role, Taiwan authorities

continue to mount an aggressive counternarcotics

campaign that involves both social rehabilitation

programs and harsh sentences for narco-trafficking.

Although Taiwan is not a UN member and cannot be a

signatory to the 1988 UN Drug Convention, it tries to

meet Convention goals regarding precursor chemicals via

an active program to control the products of its large

chemical industry. In addition, Taiwan authorities have

come to recognize that money laundering is a growing

problem. In 1997, a Money Laundering Prevention Center

was established under the auspices of the Ministry of

Justice Investigation Bureau.

Cooperation between USG law enforcement agencies

(under the auspices of the American Institute in

Taiwan) and Taiwan law enforcement institutions

continued to expand in 1997. Drug Enforcement

Administration (DEA) and Financial Crimes Enforcement

Network officials have led training seminars for Taiwan

counterparts and have broadened their range of contacts

within Taiwan's law enforcement community. Taiwan

authorities have generally responded positively and

constructively to U.S. requests on counternarcotics

issues. With the opening of the Money Laundering

Prevention Center, authorities have started sharing

with USG law enforcement officials Taiwan-originated

information related to money laundering cases where the

flow of money leads to the U.S. In addition, Taiwan

Ministry of Justice investigation officers assisted DEA

agents with a case involving a shipment of drugs to

Guam.

Taiwan's counternarcotics enforcement activities

led to a 19.1 percent increase in drug convictions in

the first ten months of 1997 over all of 1996. Drug

seizures also increased. The Money Laundering

Prevention Center pursued investigations in all 360

cases of reported suspicious transactions. Taiwan also

continues to prosecute cases of public corruption.

There are, however, no known cases of official

involvement in narcotics trafficking.

Thailand

Throughout 1997 Thailand continued its long

tradition of cooperation with the United States and the

international community in anti-drug programs. The

U.S.-Thai Mutual Legal Assistance Treaty has been in

effect since the middle of 1993, and USG requests for

assistance under the Treaty have been consistently

honored by the RTG. Cooperation between the USG and

Thailand in a number of areas, not specifically covered

by formal agreements, is long standing, close and

productive. DEA works closely with Thai drug

authorities in investigating major heroin trafficking

organizations, providing training and developing Thai

drug enforcement capabilities. The U.S. Customs Service

and Department of Defense have cooperated with various

agencies on anti-smuggling projects. DOD is also

supporting training initiatives with selected Border

Patrol and Narcotics Police units, and has assisted

development of the regional Drug Task Forces.

In another example of responsive drug enforcement

cooperation, after the illegal release on bail of a

major drug fugitive awaiting extradition to the United

States, Thai authorities moved quickly to secure his

return from Burma, expedited his extradition and

ultimately removed the judge responsible for granting

the bail. Thailand's continuing cooperation on

extraditions involved sending 17 individuals to the

U.S., all but one of whom

[[Page 12954]]

were defendants in drug cases, and some of whom were

Thai nationals or claimed Thai citizenship.

USG experts estimated that Thai opium production in

the 1996-97 growing season declined seventeen percent

from the previous year's production, to 25 metric tons.

Control programs have resulted in a reduction of the

amount of poppy grown from an estimate of up to 200

metric tons in the 1970's, to an estimated 25 metric

tons in 1997.

Although Thailand has yet to become a party to the

1988 UN Drug Convention due to its lack of anti-money

laundering laws, progress was achieved with money

laundering legislation, previously approved in Cabinet,

introduced in Parliament and passed through the first

of three readings. Thai officials have committed to the

passage of the laws during upcoming parliamentary

sessions. Thailand is generally in compliance with the

1988 UN Drug Convention except for enacting anti-money

laundering statutes. It enforces laws against the

cultivation, production, distribution, sale, transport,

and financing of illicit drugs. Last year penalties for

possession of methamphetamines were increased. As of

October 1997, 282 cases opened under the asset seizure

and consipracy statutes amounted to over 17 million

dollars seized or frozen. Thai authorities do, however,

need to strengthen the conspiracy law and create

additional legal tools to make prosecutions of higher

level offenders possible. Thailand's level of

international and bilateral cooperation on drug control

is expected to remain high, with the Kingdom setting an

example regionally for effective drug control programs,

despite current economic difficulties.

Venezuela

Venezuela continues to be a major transit country

for cocaine shipped from South America to the United

States and Europe. Law enforcement agencies estimate

that over 100 metric tons (mt) of cocaine transit

yearly. Venezuela is also a transit country for

chemicals used in the production of drugs in source

countries. Venezuela is not a significant producer of

illegal drugs, but small-scale opium poppy cultivation

occurs near the country's border with Colombia. In

recent years, Venezuela's relatively vulnerable

financial institutions have become targets for money

laundering of illegal drug profits.

In 1997, Venezuela took significant steps to

improve its counter-narcotics activity. A new drug czar

(appointed at the end of 1996) received ministerial

rank and a mandate to step up implementation of

Venezuela's comprehensive 1993 anti-drug law. Seizure

statistics increased more that 150 percent over those

in 1996. Venezuela's congress passed legislation to

control gambling casinos (a prime money laundering

target) and the government adopted new banking

regulations with strict reporting requirements. The

National Anti-Drug Commission (CNA, formerly CONACUID)

released a national anti-narcotics strategy containing

a comprehensive set of goals for the next four years.

These goals include judicial reform and a new organized

crime bill with conspiracy, asset forfeiture, and

additional anti-money laundering provisions.

Bilateral cooperation between Venezuela and the

U.S. received a boost during the October 1997 visit of

President Clinton to Caracas. The two countries signed

a joint declaration of ``Strategic Alliance Against

Drugs.'' The declaration addressed most of the areas of

the 1988 UN Convention (ratified by Venezuela in 1991)

and specific areas of bilateral concern raised in the

course of bilateral discussions during the year. During

this visit, the two countries also signed a mutual

legal assistance treaty (MLAT). 1997 also saw increased

cooperation between Venezuela and the U.S. in maritime

interdiction of illegal drug shipments.

Some problem areas remain. Narcotics-related

corruption in law enforcement, the judiciary, financial

institutions, and the prison system are continuing

concerns. The Government of Venezuela does not as a

matter of policy

[[Page 12955]]

or practice encourage or facilitate drug trafficking or

money laundering, nor do its senior officials engage

in, encourage, or facilitate such activities. Port

control needs to be improved. The new anti-money

laundering legislation needs to be implemented with an

effective control regime and organized-crime/asset

forfeiture legislation should be given a high priority.

Venezuela continues to lack an effective air

interdiction strategy.

Nevertheless, Venezuela demonstrated a high-level

political commitment to combat narcotics trafficking

and related crime during 1997. The U.S. will support

Venezuela's stepped-up counternarcotics effort and will

work closely with Venezuela in areas of common concern

as money laundering and diversion of precursor/

essential chemicals. The U.S. will also seek ways to

support judicial reform and to enhance cooperation in

maritime interdiction efforts.

Vietnam

Drug trafficking through Vietnam and domestic drug

abuse continue to increase, particularly among young

people with rising incomes. At the same time, intense

media coverage of narcotics arrests and trials,

especially stiff sentences, including several

executions, highlighted a ``get tough'' approach with

traffickers and corrupt mid-and-lower level government

officials. Law enforcement authorities also increased

drug seizures, investigations, and prosecutions,

generally. The number of drug arrests increased by 25

percent in the first six months of 1997, compared with

the same period last year. This followed an even larger

increase (66 per cent) in 1996. Some 70 percent of the

cases involved heroin. A spot raid in Ho Chi Minh City

netted 96 youngsters (mostly age 15-16) who were

dealing in heroin. In another incident, a judge in Ky

Son District (the area of heaviest drug production and

transit) was arrested in March for trafficking in

opium, but he later escaped. A Haiphong Court also

imposed stiff sentences on several drug pushers said to

have lured teenagers into heroin use. Traffickers seem

to have modified their transit routes somewhat in

response to these stepped-up enforcement efforts.

The Socialist Republic of Vietnam (SRV) took two

major initiatives during 1997: it established an Anti-

Narcotics Division (AND) of the People's Police and

reorganized and elevated responsibility for drug policy

coordination, which is now under a Deputy Prime

Minister. It also ratified the 1988 UN Drug Convention

in November. After considerable success reducing opium

poppy cultivation in the past few years, cultivation

may once again be increasing. Vietnam claims to have

reduced poppy cultivation from over 20,000 hectares in

the late 1980's and early 1990's to 2,885 hectares in

1995/96. USG experts, however, estimated an increase

from 3,150 hectares in 1996 to 6,150 hectares in 1997.

The United States and Vietnam are negotiating a

narcotics cooperation letter of agreement. During 1997,

the Vietnamese welcomed a visit by the Drug Enforcement

Administration's (DEA) Chief of International

Operations. There were also regular visits by DEA

officers based in Embassy Bangkok.

VITAL NATIONAL INTERESTS JUSTIFICATIONS

Cambodia

A transit point for Southeast Asian heroin as well

as a source country for marijuana, Cambodia experienced

violent internal conflict in early July 1997. This

conflict, and the high-level political infighting

leading up to it, disrupted USG counternarcotics

efforts aimed at helping to build a credible

counternarcotics and law enforcement infrastructure.

Indeed, all direct USG assistance to the government has

been suspended, although some humanitarian and

democracy-building programs continue.

In recent months, Cambodia appears to have begun to

try to refocus its counternarcotics efforts.

Counternarcotics agencies appear to be targeting

[[Page 12956]]

trafficking organizations more aggressively, but their

staffs remain poorly trained and equipped. Military and

police personnel have been arrested for their

involvement in narcotics-related activities, suggesting

an effort at rooting out at least some drug corruption.

DEA, U.S. Customs and other USG agencies continue to

have access to Cambodian counterparts and generally

characterize cooperation as good, in that interlocutors

are willing to share information and to respond, to the

extent possible, to requests for assistance.

However, the continuing instability has politicized

the counternarcotics effort. Various Cambodian factions

have charged political opponents with engaging in

illegal narcotics activities, often with the objective

of drawing US personnel into appearing to support one

or another party or individual. Politicization of the

counternarcotics effort has undermined some of the

value of USG assistance and harmed cooperation.

Moreover, little has been done by the Royal Government

of Cambodia (RGC) to assuage international concerns

about allegations of high-level government corruption,

leaving Cambodia's commitment to counternarcotics

efforts in doubt at this time.

The US, jointly with ASEAN and the UN, is now

engaged in a diplomatic effort to urge the RGC to

restore the Paris Peace Accords' framework by

permitting free and fair elections this year. Should

this effort to promote accountable democratic

governance in Cambodia succeed, it will be vital to

maintain our ability to provide all types of

counternarcotics, as well as other assistance, if

appropriate, to strengthen independent judicial systems

and foster accountable institutions of civil society in

Cambodia. Assistance to support democratic development

and long-term economic stability in Cambodia is a key

element of our overall long-term commitment to

stability and openness in the Asia-Pacific region.

Cambodia figures in our own strategic interest in

ASEAN's long-term political and economic stability,

especially since Cambodia continues to have an interest

in becoming a member of ASEAN. Accordingly, while it is

not appropriate at this time to certify Cambodia as

either fully cooperating with the United States or

taking adequate steps on its own to combat drug

production and trafficking, the risks posed by

inadequate counternarcotics performance are outweighed

by the risks posed to US vital national interest if

assistance is not available.

Colombia

As in previous years, Colombia remained the world's

leading producer and distributor of cocaine and an

important supplier of heroin and marijuana.

Notwithstanding significant eradication in the Guaviare

region, coca cultivation in southern Colombia grew

markedly, leading to an increase in coca cultivation

overall.

In November 1997, the Colombian Congress passed a

constitutional amendment reversing the 1991

Constitutional ban on the extradition of Colombian

citizens. This represents significant progress, and is

due in large part to effective lobbying of the

Government of Colombia (GOC) and the Colombian Congress

and Senate by the Colombian private sector.

Unfortunately, the final bill falls short because it

contains a ban on retroactive application. The

Government and members of the Colombian Congress have

filed challenges to this ban. However, if the ban is

upheld by Colombia's Constitutional Court, then the

Cali kingpins would be placed beyond the reach of U.S.

justice for crimes committed before December 1997.

Moreover, the constitutional bill may also require

implementing legislation, which the GOC has promised to

seek before President Samper leaves office in August

1998. This legislation could give opponents of

extradition another opportunity to weaken extradition.

In early 1997, Colombia passed excellent

legislation which stiffened sentences for narcotics

traffickers, strengthened regulations affecting money-

laundering and permitted forfeiture of the assets of

narcotics traffickers.

[[Page 12957]]

Implementation of these strong laws by the GOC has been

disappointingly slow and the GOC has yet to apply them

aggressively.

The GOC also took measures to improve prison

security in Colombia, giving the Colombian National

Police (CNP) responsibility for security in the maximum

security pavilions housing the major narcotics

traffickers, a great improvement. However, continued

attention has not been given to the problem. The U.S.

Embassy has heard fewer reports of traffickers carrying

out their illicit business activities with impunity

from their cells, but there are still indications that

the drug kingpins maintain some ability to operate

their criminal enterprises and exert influence from

prison.

The Colombian Government made only limited progress

in 1997 against narcotics-related corruption. Several

former congressmen and the mayor of Cali were sentenced

on corruption charges stemming from the ``Caso 8000''

investigation. The GOC has demonstrated little

inclination to root out official corruption and to

strengthen democratic institutions from the corrupting

influence of narcotraffickers.

The Colombian National Police and selected units of

the military involved in counternarcotics activities

produced impressive results in 1997. Figures for both

eradication and seizures were up, despite significant

challenges from heavily-armed narcotics traffickers and

several elements of the guerrilla movements which

support them. The maritime agreement signed in early

1997 has been successfully implemented and resulted in

interdiction of several cocaine shipments.

Although the GOC has made important progress in

some areas this year, the USG cannot certify Colombia

as fully cooperating with the United States on drug

control, or as having taken adequate steps on its own

to meet the goals and objectives of the 1988 UN Drug

Convention. Poor government performance in the

extradition debate, lack of a concentrated effort to

combat official narcotics-related corruption and still

lagging enforcement of strong counternarcotics laws all

argue against certification.

However, the vital national interests of the United

States requires that U.S. assistance to Colombia be

provided. The continuing dominance of Colombian cartels

in the cocaine industry, their growing role in the

heroin trade and the growing role of the guerrillas in

shielding and protecting illicit drug production make

the challenges in Colombia greater than ever before. To

meet these challenges, we need to work even more

closely with the GOC to expand joint eradication

efforts in new coca growing areas in southern Colombia

and in opium cultivation zones, to enhance

interdiction, and to strengthen law enforcement. The

GOC would not likely approve such an expanded program

if denied certification for a third straight time. We

have a unique opportunity with significant US-supplied

assets deployed and the commitment of the CNP and

elements of the armed forces to strong efforts in these

areas. However, they will need increased resources and

training to perform these tasks adequately. Strong

leadership must come from the Colombian government to

reform and defend essential democratic institutions,

such as the country's judiciary. The coming elections

may provide opportunities for further cooperation.

Moreover, key elements of US assistance which could

help in this effort, such as potential foreign military

financing (FMF) and international military education

and training (IMET), could not be provided to our

allies for counternarcotics operations if Colombia were

denied certification again. Indeed, this year the

President deemed necessary the provision of FY97 IMET

and previous year FMF by means of a waiver under

Section 614(b) of the FAA.

U.S. economic engagement is also a critical element

in counterbalancing the influence of drug money in the

Colombian economy. After two years of denial of

certification, U.S. companies, without access to OPIC

and EXIM Bank financing, have lost significant business

to competitors. With a vital

[[Page 12958]]

national interest certification, U.S. companies will be

able to compete on a level playing field for up to $10

billion in upcoming major contracts.

In making the decision to provide a vital national

interests certification to Colombia this year, we were

mindful of the deteriorating security and human rights

environment in Colombia, the threat to that country's

democracy, and the threat posed to Colombia's neighbors

and to regional stability. The cumulative effects of

Colombia's forty-year old insurgency, narco-corruption,

the rise of paramilitaries, the growing number of

internally displaced Colombians, growing incidents of

human rights abuses, and the potential threat that

Colombia's violence and instability pose to the region

all require a vital national interests certification.

Such a certification is necessary so that the USG can

provide assistance in order to broaden and deepen its

engagement with this and the next Colombian government

in an effort to effectively confront and eliminate

narcotrafficking. The threats to U.S. vital national

interests posed by a bar on assistance outweigh the

risks posed by Colombia's inadequate counternarcotics

performance.

Pakistan

Pakistan is a major producer and an important

transit country for opiates and cannabis destined for

international markets. In 1997, Pakistan produced

approximately 85 metric tons (mts) of opium, an

estimated increase of 13.3% from 1996. Heroin and opium

seizures increased, but the overall record of law

enforcement action continued to be poor. Seizures of

precursor chemicals improved substantially. The Nawaz

Sharif government, which took office in February 1997,

voiced greater concern about Pakistan's narcotics

problems, although this has not yet manifested itself

in essential counternarcotics actions.

The 1997 counternarcotics efforts of the Government

of Pakistan (GOP) were seriously deficient. The two

major accomplishments were passage of the comprehensive

drug control legislation and destruction of heroin

processing laboratories in Pakistan's Northwest

Frontier Province. One major arrest requested by the

USG took place, but there were no known trials of

previously arrested drug kingpins and no extraditions

of the 23 individuals requested by the USG for

narcotics-related offenses. Opium and heroin seizures

increased and acetic anhydride seizures sharply

increased, but the GOP did not interdict any large

opiate smuggling caravans on the well-traveled

Baluchistan route from Afghanistan into Iran.

The GOP made no progress in crop eradication. Poppy

cultivation increased 21% and opium production

increased 13%, despite USG programs and USG-assisted

UNDCP programs which had made steady progress in

decreasing production and poppy cultivation in the past

five years. The increase was primarily due to the GOP's

failure to enforce the poppy ban in Dir District, the

site of highest opium poppy growth, despite warnings

from both UNDCP and the USG that the GOP must continue

to press tribal groups living in that district to

eradicate illicit opium poppy. The GOP also made no

progress in demand reduction. There were no new

programs designed to control Pakistan's addict

population, estimated to be between 3 and 5 million.

The GOP estimates the addict population growth at 7% a

year.

USG/GOP law enforcement cooperation was severely

strained by the arrest, torture, courtmartial and

conviction of a DEA employee involved in an operation

which identified Pakistani Air Force Officers involved

in drug smuggling to the U.S. These steps were taken by

elements of the GOP with the full involvement of the

country's Anti Narcotics Force (ANF). Recently, the GOP

reduced the DEA employee's prison sentence on appeal.

The Administration remains engaged with the GOP in

seeking the release of this employee from prison.

Pakistan is a party to the 1988 UN Drug Convention,

which it ratified in October 1991, but implementing

legislation on money laundering has

[[Page 12959]]

not yet been drafted. While Pakistan's Control of

Narcotics Substances Act, passed in 1997, deals with

drug-related money laundering, Pakistan must still

criminalize money laundering from non-drug related

offenses.

The USG/GOP bilateral agreement provides funding

for law enforcement, roads and crop substitution in the

NWFP, and demand reduction activities. The GOP made

very little progress in meeting the goals of the

bilateral agreement and 1988 UN Drug Convention in

1997. The continued detention of the DEA employee,

despite repeated urgings at the highest levels for his

release, seriously complicates the counternarcotics

relationship. Because of this and because of the GOP's

poor counternarcotics law enforcement record and the

substantial upsurge in illicit poppy growth, Pakistan

cannot be judged to have cooperated fully with the USG

or taken adequate steps on its own to meet the

requirements of the 1988 U.N. Drug Convention.

However, vital U.S. national interests would be

damaged if Pakistan were to be denied certification.

Implementing sanctions would vitiate the broader U.S.

policy of high-level engagement, including strong

support for Prime Minister Sharif's commitment to hold

a dialogue with India as well as to strengthen

democracy and reform the economy.

Helping the GOP to strengthen its economy and to

move towards a more liberal, broader-based market

economy is one of the USG's major goals. Yet, a number

of new or potential initiatives would be halted or

thrown into question by denial of certification. This

could include such fundamental programs such as those

funded by OPIC and EX-IM, PL 480 projects involving

commodities other than food, and possibly the funding

of NGOs. Certification denial would also require the

U.S. to vote against Pakistan in multilateral

development banks (``MDBs'') at a time when Pakistan is

vulnerable to a financial crisis. The combination of

such negative votes and removal of possible assistance

could weaken Pakistan's investment climate, increase

its prospects for sliding into financial insolvency and

sharply inhibit our ability to help the GOP modernize

its economy.

In addition to this statutory basis for a vital

national interests certification, it should also be

recognized that denial of certification could

jeopardize broader interests between the U.S. and

Pakistan, including the ability to achieve meaningful

progress with the GOP on such important goals as

nonproliferation and Afghanistan.

Accordingly, while it is not appropriate at this

time to certify Pakistan as either fully cooperating

with the United States or taking adequate steps on its

own to combat drug production and trafficking, the

risks posed by inadequate counternarcotics performance

are outweighed by the risks posed to US vital national

interests if U.S. assistance was no longer available

and the U.S. was required to vote against loans to

Pakistan in MDBs, thus justifying a vital national

interests certification.

Paraguay

A determination to decertify Paraguay would be

justified in view of its substantial lack of

achievement in meeting its counternarcotics goals in

1997. However, the vital national interests of the

United States require certification, so that the

assistance, withheld pursuant to provisions of the

Foreign Assistance Act of 1961, can be provided.

Paraguay is a transit country for cocaine,

primarily Bolivian, en route to Argentina, Brazil, the

United States, Europe and Africa, as well as a source

country for high-quality marijuana. Paraguay was fully

certified for 1996, after the Government of Paraguay

(GOP) adopted a national drug control strategy,

promulgated an anti-money laundering law, and increased

its counternarcotics cooperation with the United States

and regional countries. Paraguay's counternarcotics

goals for 1997 included investigating major cocaine

traffickers, making significant seizures and arrests,

preventing the escape of arrested drug traffickers,

implementing the money laundering law

[[Page 12960]]

and provisions of the anti-drug law (Law 1340/88) aimed

at punishing and preventing official corruption,

enacting legislation authorizing controlled deliveries

and undercover operations, as well as criminalizing

drug-related conspiracy.

Unfortunately, Paraguay did not come close to

meeting any of these objectives. Responsibility for the

failure to do so is shared by all branches of the

Paraguayan government. There were no successful

investigations of significant traffickers. Although

cocaine seizures showed a minimal increase over 1996,

all involved minor traffickers. The largest seizure was

accompanied by the arrest of four suspects caught in

possession of over 21 kilos of cocaine. However, a

criminal court judge freed all four on what appear to

be spurious grounds; this judge received a minor

disciplinary sanction and continues to serve in office.

Judicial corruption was also suspected in connection

with Paraguay's refusal to extradite a suspected

narcotics trafficker to France. In that case, a lawyer

was recorded accepting an alleged bribe to pass on to

an appellate judge; the judge subsequently was removed

from office for his actions in yet another case.

Paraguay is a major money laundering center, but it

is unclear what portion is drug-related. The

promulgation of the 1996 money laundering law, and the

creation of an anti-money laundering secretariat

(SEPRELAV), in January 1997, now provides the GOP with

the legal tools necessary to move against this criminal

activity, but little has been done so far to apply the

law. SEPRELAV also has not been provided with a budget

to enable it to operate as an independent organization.

The Paraguayan Congress, controlled by the

opposition parties, made no progress on a major

revision of the anti-drug law, which was submitted by

the GOP in 1995. The GOP did not submit new legislation

to authorize controlled deliveries, undercover

operations or criminalize drug-related conspiracy. It

also failed to complete a precursor chemical monitoring

survey that was promised in 1996.

In part, these failures were due to the GOP's

allowing itself to become distracted by election-year

politics, particularly by its opposition to the

presidential candidacy of former Army Commander, and

unsuccessful 1996 coup plotter, Lino Oviedo. The GOP

and opposition parties also demonstrated reduced

political will to confront the politically influential

and economically powerful frontier commercial and

contraband interests during an election year.

The GOP, realizing its shortfalls on

counternarcotics cooperation and cognizant of the USG

decision on certification, recently has reaffirmed its

political will to prioritize counternarcotics efforts,

including taking law enforcement action against

significant narco-traffickers, agreeing to negotiate a

new bilateral extradition treaty with the USG, and

preparing a draft law to explicitly authorize

controlled deliveries. While positive steps, these

measures have yet to bear fruit; their possible

fulfillment will have a bearing on next year's

certification decision, not this year's.

Denial of certification would, however, cut off

assistance programs designed to meet the priority US

goal of strengthening Paraguay's democratic

institutions, at precisely the moment when those

institutions are being severely tested by the stress of

hotly-contested presidential, congressional and

gubernatorial election campaigns. Denial of

certification at this time could have an unintended

negative impact on the ongoing election campaign.

Denial of certification would also jeopardize ongoing

cooperation and assistance programs with the GOP

against other international crimes (smuggling,

intellectual property piracy, terrorism). Moreover,

vital national interests certification would help to

promote the political will and positive action against

narcotics trafficking that we will seek from the next

GOP.

The risks posed to all of these US interests

(promoting democracy, cooperation against other crimes

and continued counter-terrorism cooperation) by a

cutoff of bilateral assistance outweigh the risks posed

by Paraguay's failure

[[Page 12961]]

to cooperate fully with the USG, or to take adequate

steps to combat narcotics on its own.

STATEMENTS OF EXPLANATION

Afghanistan

Afghanistan continued as the world's second largest

producer of opium poppy, according to USG estimates.

Land under poppy cultivation and opium production rose

3 percent in 1997 according to US satellite surveys.

Continued warfare, destruction of the economic

infrastructure and the absence of a recognized central

government with control over the entire country remain

obstacles to effective drug control.

The inaction and lack of political will of the

Taliban faction, which controls 96 per cent of

Afghanistan's opium-growing areas, as well as

substantial drug trade involvement on the part of some

local Taliban authorities impede meaningful

counternarcotics progress as well. The Taliban, formed

by religious students, began its military campaign in

Afghanistan in 1994 and assumed effective control over

two thirds of the country in fall 1996. There is no

evidence that the Taliban or any other faction

controlling Afghan territory took substantive law

enforcement or crop eradication action in 1997.

Although the Taliban condemned illicit drug

cultivation, production, trafficking and use in 1997,

there is no evidence that Taliban authorities took

action to decrease poppy cultivation, arrest and

prosecute major narcotics traffickers, interdict large

shipments of illicit drugs or precursor chemicals or to

eliminate opiate processing laboratories anywhere in

Afghanistan in 1997. Narcotics remain Afghanistan's

largest source of income, and some Taliban authorities

reportedly benefit financially from the trade and

provide protection to heroin laboratories. There are

numerous reports of drug traffickers operating in

Taliban territory with the consent or involvement of

some Taliban officials. Taliban authorities called for

international alternative development assistance as a

precondition to eradicating opium poppy cultivation.

Afghanistan is a party to the 1988 UN Drug Convention.

In November 1997, the Taliban responded to a UNDCP

initiative by agreeing to eliminate poppy cultivation

in districts where alternative development was

provided, to control poppy cultivation in areas where

poppy was not previously grown and to eliminate

morphine and heroin laboratories when these sites were

brought to their attention. To date, these commitments

have not been tested.

The USG strongly supports the UN Secretary

General's Special Envoy for Afghanistan, Ambassador

Lakhdar Brahimi, and the UN Special Mission to

Afghanistan in their efforts to promote a cease-fire,

followed by negotiations leading to a broad-based

government that can address the problems of narcotics,

terrorism and humanitarian concerns. We assist the

peoples of Afghanistan, subject to resource

availability, primarily through UN programs aimed at

humanitarian relief, reconstruction and

counternarcotics. In 1997, USG transferred $1.6 million

in FY-95 and FY-96 funds earmarked for UNDCP to help

finance UNDCP's capacity building project and poppy

reduction projects in Afghanistan. The USG also

provided an initial $269,202 of a $772,905 poppy

reduction/alternative development project being

implemented by an American non-governmental

organization (NGO), Mercy Corps International (MCI) in

Helmand Province.

Since U.S. legislation makes special allowance for

continuation of such assistance generally,

notwithstanding any other provision of law, denying

certification of Afghanistan would have minimal effect

in terms of implementation of this policy.

Continuation of large-scale opium cultivation and

trafficking in Afghanistan, plus the failure of the

authorities to initiative law enforcement actions,

preclude a determination that Afghanistan has taken

adequate steps on its

[[Page 12962]]

own or that it has sufficiently cooperated with USG

counternarcotics efforts to meet the goals and

objectives of the UN 1988 Drug Convention, to which

Afghanistan is a party. Accordingly, denial of

certification is appropriate.

Burma

Burma continues to be the world's largest source of

illicit opium and heroin. In 1997, production declined

slightly from the previous year's levels; estimates

indicated there were 155,150 hectares under

cultivation, which could yield a maximum of 2,365

metric tons of opium.

On the law enforcement front, the Government of

Burma (GOB) seized more opium and heroin, and raided

more laboratories than in the past. These were welcome

developments, but, given the extent of the problem,

they were insufficient to make noticeable inroads

against drug trafficking and production. Seizures of

amphetamines and the precursor chemical acetic

anhydride declined. There were no arrests of major

traffickers. Drug lord Chang Qifu (Khun Sa), who

``surrendered'' to Burmese authorities in 1996, was not

brought to justice, and the GOB continued to refuse to

render him to the United States. The GOB did return a

U.S. fugitive to Thailand, which extradited him to the

United States.

Several ethnic groups declared that they would

establish opium free zones in their territories by the

year 2000, and the GOB undertook some eradication

efforts as well. Establishment of opium free zones

would require considerable time and investment of

resources. The Government of Burma approved a United

Nations Drug Control Program, a five-year alternative

development project in the ethnic Wa region; as the

year closed, UNDCP was making arrangements to initiate

work.

Money laundering and the return of narcotics

profits laundered elsewhere appear to be a significant

factor in the overall Burmese economy. An

underdeveloped banking system and lack of enforcement

against money laundering have created a business and

investment environment conducive to the use of drug-

related proceeds in legitimate commerce. The GOB has

encouraged leading narcotics traffickers systematically

to invest in infrastructure and other domestic

projects.

USG counternarcotics cooperation with the Burmese

regime is restricted to basic law enforcement

operations and involves no bilateral material or

training assistance. The USG remains concerned over

Burma's commitment to effective counternarcotics

measures, human rights, and political reform. The USG

is prepared to consider resuming appropriate assistance

contingent upon the GOB's unambiguous demonstration of

a strong commitment to counternarcotics, the rule of

law, punishment of traffickers and major trafficking

organizations (including asset forfeiture and seizure),

anti-corruption, eradication of opium cultivation,

destruction of drug processing laboratories, and

enforcement of money laundering legislation.

Iran

Iran has strengthened its counternarcotics

performance during the past year--particularly in the

area of interdiction--but direct information is limited

because the United States has no diplomatic presence in

the country.

Iran's interdiction efforts are apparently

vigorous, if partially effective. Costly physical

barriers and aggressive patrolling of its eastern

borders have led to Iranian claims of record narcotics

seizures of nearly 200 tons last year--and significant

Iranian casualties as well. But with an estimated 1,000

tons of opiates crossing the country each year, Iran

remains the major transit route for opiates from

Afghanistan and Pakistan to the West, although we do

not have recent data on the amount that may reach the

United States. Punishment of traffickers is harsh but

drug trafficking continues on a large scale.

[[Page 12963]]

Cultivation of opium poppies continues in Iran, but

the extent of cultivation is difficult to ascertain

conclusively. The 1993 United States Government survey

of opium cultivation in Iran estimated that 3,500

hectares were under cultivation. U.S. crop estimates

were a major factor in placing Iran on the majors' list

of drug producing and transit countries. Iran claims

complete eradication of the opium poppy crop. Recent

statements by the Dublin Group that opium cultivation

has markedly decreased give at least partial credence

to the Iranian claims, but a new crop survey would

help--and will be undertaken--to confirm such

eradication.

Iran has taken some steps to confront corruption

among customs, police and military personnel. Observers

have noted several convictions of corrupt officials but

the corruption of low-level officials continues; multi-

ton shipments of opiates could not traverse Iran

without assistance from complicit law enforcement or

military personnel. There have been no recent, credible

reports concerning high-level complicity in narcotics

trafficking and high-ranking officials of the GOI have

clearly stated Iran's official aversion to narcotics

trafficking.

Iran has ratified the 1988 UN Drug Convention, but

the United States Government and other observers remain

unaware of implementing legislation to bring Iran into

full compliance with the Convention. A 1997 proposal

approved by the Expediency Council appears to allow for

stronger drug laws and demand reduction programs, but

the extent to which the proposal helps Iran to comply

with the Convention cannot be predicted before the

proposal is enacted as unforceable laws or regulations.

No bilateral narcotics agreement exists between Iran

and the United States.

Iran has recently stated, at the highest level, a

desire to cooperate in international counternarcotics

programs. With the exception of the Iran/Pakistan/UNDCP

border interdiction program and a UNDCP demand

reduction survey, however, Iran does not yet

participate in important cooperative counternarcotics

efforts. Such programs of international cooperation

would add significantly to external understanding of

Iran's narcotics problems and counter-narcotics

efforts.

Nigeria

Nigeria is the hub of African narcotics trafficking

and the headquarters for global poly-crime

organizations. Nigerian narcotics traffickers operate

worldwide networks that transport heroin from Asia to

Africa, the NIS and the United States, and cocaine from

South America to Europe, Africa and East Asia. Nigerian

traffickers are responsible for a significant portion

of the heroin that is abused in the United States.

Marijuana is the only narcotic cultivated in Nigeria;

large quantities are exported to other African nations

and to Europe, but have little impact upon the United

States.

The need to repatriate their criminal gains has

motivated Nigerian traffickers to develop a

sophisticated and flexible money laundering system

capable of handling not only narcotics profits, but the

ill-gotten gains of Nigerian sponsored financial fraud

as well. The dislocations of Nigeria's economy have

helped to engender a vast informal commercial sector,

immune to most regulation and well suited to illegal

activities.

The record of Nigerian law enforcement against the

narcotics trade is, at best, mixed. The one force

capable of making headway against narcotics, the

Nigerian Drug Law Enforcement Agency (NDLEA), has been

handicapped by deficiencies in political and financial

support. The NDLEA arrests many couriers, but few

organization leaders. NDLEA efforts at Nigeria's

international airports have led to increased seizures

of narcotics, and may be a factor contributing to

traffickers's expansion into bulk shipments and across

borders into Nigeria's neighbors.

The Government of Nigeria has failed to react

responsibly to the ease with which criminals function

in Nigeria. Appropriate criminal narcotics

[[Page 12964]]

and money-laundering legislation has been enacted, but

remains unenforced, with no evidence that prosecutions,

convictions or asset seizures have been made against

any major criminal figures. Nigeria failed to provide

consistent policy advice to its law enforcement organs,

lacked the political will to attack pervasive

corruption, and again neglected to provide sufficient

material support for even the most basic operations of

its law enforcement agencies.

Nigeria again failed to meet its obligations to the

United States and other nations with regard to

extraditions and other forms of counter-narcotics

cooperation. Even direct promises of action have

remained unredeemed. A December, 1996, United States

mission to Nigeria received the Government of Nigeria's

assurance that extraditions of criminals to the United

States could resume immediately. No action has been

taken on extraditions over one year later.

[FR Doc. 98-6584

Filed 3-13-98; 8:45 am]

Billing code 4710-10-M